View from Asia

What do cataracts have to do with the cost of doing business in China?Tom Leander, CFO MagazineOctober 1, 2006

This summer I was on hand to help shoot a documentary in Qinghai province. The film chronicled the efforts of a Hong Kong charity to bring eye surgery to this forgotten part of China on the Northern Tibetan plateau. Because the land of parched mountains, dusty towns, and ancient temples is rugged and inaccessible, the only practical way to bring the medical equipment in is via train, from which Beijing doctors hang out shingles and await a pilgrimage of the blind.

They come in battalions. Rural Chinese suffer from cataracts in high numbers due to poor nutrition and lack of preventive medicine. Patients will walk overland — some as far as 185 miles — to get to the train, where more than 2,000 operations, or more than 20 a day, will be performed for free over the 90 days. They are shepherds and farmers, a mixture of Buddhist and Moslem, an ethnic mix of Tibetan, Hui, Qinghai, and Han Chinese people.

Lifeline Express, as the train is dubbed, provides a service the country desperately needs. It normally costs $500 to obtain cataract surgery for the elderly, more for young children who require special attention. Per-capita income outside of the cities in Qinghai province is half that. There is no such thing as medical insurance.

It is one thing to read about the plight of China's rural poor. It is another to see it — and anyone harboring big dreams about business in China should take a look. Two-thirds of China's 1.3 billion people live in rural areas. Some 160 million subsist on less than $1 a day and often lack access to adequate health and education services, says the World Bank. Some government authorities say the income disparity between urban and rural dwellers is close to 7:1.

The current administration has made the eradication of rural poverty a priority, and has abolished agricultural taxes. Still, farmers have no right to own property. With the absence of property rights and a dearth of services comes immense vulnerability — and anger. The government tallied 87,000 protests, demonstrations, and other "mass incidents," mostly in the countryside, in 2005.

Foreign firms will eventually step into this volatile mix as they tap lower-cost labor in China's huge hinterland. In the absence of any social safety net, the role of provider will fall partly on them, via investment in corporate social responsibility programs as a "license to operate" in a stricken region. Some will see this as an onerous cost; others, necessary risk management to quell unrest. Some may even recognize an opportunity to build goodwill with local governments and perhaps China's future consumers.

The spectacle of China's major cities can blind a visitor to the rest of the country. Certainly, the current generation of foreign entrepreneurs would not be the first who failed to understand the impact of rural poverty on China as a whole. But the ones who succeed will be those who recognize that eye surgery may be just one element of a successful business plan in the Middle Kingdom.